Canberra - Prime Minister Tony Abbott told Parliament on Wednesday he would do everything he "reasonably can" to repair relations with Indonesia, damaged by allegations of Australian phone tapping of senior Indonesian figures.
But Abbott told Parliament he did not "propose to overreact now" to Indonesian anger over this issue.
Indonesian President Susilo Bambang Yudhoyono on Tuesday criticised Abbott for not expressing remorse over the alleged wiretapping of his phone, and said co-operation agreements between the near-neighbours would be reviewed.
Australian Broadcasting and The Guardian reported that they had documents from National Security Agency leaker Edward Snowden showing that the top-secret Australian Signals Directorate also targeted the phones of Indonesian first lady Kristiani Herawati and eight other government ministers and officials.
"I deeply and sincerely regret the embarrassment that media reports have caused President Yudhoyono who is a very good friend of Australia; perhaps one of the very best friends that Australia has anywhere in the world," Abbott said on Wednesday.
"I do understand how personally hurtful these allegations have been, these reports have been, for him and his family," he said.
"My intention, notwithstanding the difficulties of these days, is to do everything I reasonably can to help to build and strengthen the relationship with Indonesia which is so important to both our countries," he added.
But Abbott failed to directly answer a question asked by opposition leader Bill Shorten: What progress had been made to restore Australia's relationship with Indonesia?
Analysts describe the furore as the lowest point in a perennially volatile bilateral relationship since 1999, when Australia led a UN military force into the former Indonesian province of East Timor following a bloody independence ballot. At that time, Indonesia ripped up a 4-year-old security treaty with Australia. A new treaty has since been signed.
Indonesian Religious Affairs Minister Suryadharma Ali has become the first government minister known to have cancelled a visit to Australia because of the spying furore, an Australian academic said on Wednesday.
Professor Damien Kingsbury, director of Deakin University's Centre for Citizenship, Development and Human Rights, said Ali was to arrive in Melbourne next weekend to give a seminar on managing religious diversity in Indonesia.
Ali cancelled on Tuesday, said Kingsbury, who had organised the seminar based on Ali's promise to attend.
"The technical reason given in writing in the official letter was that he had to resolve some financial matters to do with his party before the end of the year," Kingsbury said.
"But the email correspondence I got from his office was that it was obviously too sensitive; it was too difficult a time for him to come," he said
The minister could not immediately be contacted for comment.
Abbott told Parliament on Tuesday he would not apologise or explain Australia's espionage activities.